US Commerce Secretary wants a higher minimum wage - in Mexico

In a recent CNBC interview, US Commerce Secretary, Wilbur Ross, argued that one of the problems with NAFTA is that the minimum wage in Mexico hasn't climbed as fast as it should.

"The theory of NAFTA had been a gradual convergence of living standards between Mexico and the United States," he said. "That really hasn't happened on the Mexican side. The minimum wage...has barely gone up in peso terms."

That means that employers can still find significantly cheaper labour in Mexico. It also means that Mexican workers don't have the money to buy higher-priced U.S.-made goods.

“The peso has depreciated quite a lot against the dollar," he told senators. So on a purchasing power basis, the average Mexican worker is far worse off than he or she was five or 10 years ago. That was not the original intent of NAFTA."

Ross is actually wrong when he says that the Mexican minimum wage has “barely gone up in peso terms.” The Mexican minimum wage has increased 11 times since 2009, rising by about 50%. The U.S. minimum wage has not increased since 2009.

But even with all those increases, the Mexican minimum wage is a fraction of the U.S. minimum wage. Workers in Mexico must be paid at least 80 pesos a day, which works out to only about $ 4. The U.S. minimum wage is $ 7.25 an hour.

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